Structural Unemployment

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DEFINITION of 'Structural Unemployment'

A longer-lasting form of unemployment caused by fundamental shifts in an economy. Structural unemployment occurs for a number of reasons – workers may lack the requisite job skills, or they may live far from regions where jobs are available but are unable to move there. Or they may simply be unwilling to work because existing wage levels are too low. So while jobs are available, there is a serious mismatch between what companies need and what workers can offer. Structural unemployment is exacerbated by extraneous factors such as technology, competition and government policy.

INVESTOPEDIA EXPLAINS 'Structural Unemployment'

Structural unemployment can often last for decades and may need radical change to redress the situation.

For example, hundreds of thousands of well-paying manufacturing jobs have been lost in the U.S. over the past three decades as production jobs have migrated to lower-cost jurisdictions in China and elsewhere.

The 2007-09 global recession also aggravated structural unemployment in the U.S. As the jobless rate peaked at over 10% and the average unemployment period for millions of workers rose significantly compared with previous recoveries, their skills deteriorated during this period of prolonged unemployment. The depressed housing market also affected the job prospects of the unemployed, since relocating to a new job in another city would mean selling their homes at a substantial loss, which not many were willing to do.

Growing technology in all spheres of life may increase future structural unemployment, since workers without adequate skills will get marginalized, while even those with skills may face redundancy given the high rate of technological obsolescence.